updated 1/20/2005 12:29:19 PM ET 2005-01-20T17:29:19

Citigroup Inc., the nation’s largest financial institution, reported record quarterly earnings on Thursday, but said that 2005 earnings could be at the shallow end of Wall Street expectations.

The bank, based in New York, said profits for the fourth quarter totaled $5.32 billion, or $1.02 a share, up 12 percent from $4.76 billion, or 91 cents a share, a year earlier.

Analysts surveyed by Thomson First Call had expected earnings of $1.02.

Citigroup said its fourth-quarter results included a $244 million after-tax charge related to closing its Japan Private Bank amid allegations of improper activities and a $131 million after-tax reserve related to resolution of a Securities and Exchange Commission investigation dealing with transfer agents.

The bank’s chief executive officer, Charles Prince, told analysts in a phone conference that “the growth prospects of the company feel very good to me.”

Still, both Prince and Chief Financial Officer Sallie Krawcheck said the bank wouldn’t benefit this year as it did in 2004 from big releases of reserves as credit improved. Higher interest rates and lower credit quality could result in earnings at the lower end of analyst expectations, Krawcheck said.

Analysts surveyed by Thomson First Call project the bank’s earnings for this year in a range of $4.20 to $4.57.

Citigroup also announced Thursday that its board approved a 10 percent increase in the company’s quarterly dividend. The dividend of 44 cents — up from 40 cents — will be payable Feb. 25 to stockholders of record as of Feb. 7.

“While 2004 held some significant challenges for the company, we continued to position Citigroup for long-term growth and success,” Prince said in a statement issued with the earnings report.

He added that “although the legal and regulatory charges we recorded in 2004 were significant disappointments, resolving open legal and regulatory issues is a key management priority.”

Last May, Citigroup, in one of the largest securities fraud settlements ever, agreed to pay $2.65 billion to settle a class action suit brought by investors who bought WorldCom Inc. securities before the telecommunications company went bankrupt in 2002.

In September, Japan’s Financial Services Agency yanked Citigroup’s private banking license after accusing it of failing to implement safeguards against money laundering, misleading customers about financial risks, and other violations. The private bank managed the investments of wealthy individuals.

Profits in the global consumer group rose 17 percent to $3.1 billion, while earnings from the global corporate and investment bank advanced 32 percent to $1.69 billion, the bank said. Global wealth management earnings were down 75 percent at $97 million because of the problems in Japan, and earnings from global investment management were off 11 percent at $254 million because of reserves set aside for regulatory issues and cash outflows.

Revenue for the fourth quarter was $21.88 billion, up 8 percent from $20.2 billion a year earlier. For the year, revenue was $86.2 billion, up 11 percent from $77.4 billion in 2003.

For the year, Citigroup earnings were $17.05 billion, or $3.26 per share, down from $17.85 billion, or $3.42 a share, in 2003.

Results for 2004 included an after-tax charge of $4.95 billion, or 95 cents per share, for the WorldCom settlement and increased litigation reserves related to a 2003 regulatory settlement. Results also included a $756 million, or 15 cents per share, after-tax gain on the sale of the company’s 20 percent stake in the Samba Financial Group.

Excluding these items, full-year earnings would have been $21.2 billion, or $4.07 per share, Citigroup said.

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